The Pfandbrief 2011 | 2012
The Pfandbrief 2011 | 2012
The Pfandbrief 2011 | 2012
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<strong>The</strong> Legal Framework for Issuing <strong>Pfandbrief</strong>e<br />
Mortgage lending value vs. market value<br />
Value<br />
<br />
Market value<br />
Mortgage lending value<br />
60% mortgage lending limit<br />
10<br />
<br />
Time<br />
Conservative valuation of real estate<br />
<strong>The</strong> mortgage lending value (MLV) is determined according to detailed statutory provisions<br />
Based on permanent features of the property<br />
Market value is the upper limit for the MLV<br />
Occasion-related review of the MLV<br />
Claims up to 60% of the MLV are eligible as cover<br />
One of the central pillars of the safety of the Mortgage <strong>Pfandbrief</strong> is that property financings<br />
may be included in cover only up to the mortgage lending limit of 60% of the mortgage lending<br />
value (MLV). <strong>The</strong> way in which the MLV is to be determined, and the requirements in<br />
respect of the valuer’s qualifications and the valuer’s independence vis-à-vis the <strong>Pfandbrief</strong><br />
Bank are regulated in detail by the <strong>Pfandbrief</strong> Act and the Regulation on the Determination<br />
of the Mortgage Lending Value (BelWertV). <strong>The</strong> MLV reflects only the long-term, sustainable<br />
aspects of a property, meaning that speculative aspects are disregarded. <strong>The</strong> aim here is that<br />
the MLV, unlike the market value, shows as little in the way of fluctuation as possible. <strong>The</strong><br />
MLV must not exceed, and indeed is usually lower than, the market value. However, the<br />
difference between the two values does not remain constant, for which reason it is not possible<br />
to make a simple value deduction. Instead, the difference is determined by the expectations<br />
of the market with respect to the future price development of the property in question.<br />
Yet the mortgage lending limit of 60% of the MLV does not mean that a loan, to be eligible as<br />
cover, may only be equivalent to this 60% limit. Only the part of the loan that serves as cover<br />
may not exceed this limit. This can be achieved by dividing the loan into two parts – one up<br />
to the 60% limit and the other above it. However, this is not necessary in practice as an ideal<br />
division is possible and is applied in most cases.<br />
Finally, the properties lent against must be insured against the risks relevant to the location<br />
and type of property concerned.